Why I’m building a curated crypto art market
In May of 2019, I founded blockchain.art because I wanted to address the art market issues that I witnessed during my tenure as the executive director of the viennaContemporary art fair and, prior to that, as the director of Art Moscow. Building and running art fairs for more than a decade has given me an intimate perspective on the pain points felt on all sides of the art trade. Artists are not paid on time, or receive no royalties from the resale of their works. Customers feel there is too much friction in the sales process: pricing is opaque and logistics (e.g. international shipping and customs) are overly complicated. Authenticity and provenance are difficult to ascertain and prove. Forgeries abound.
The art market achieved $68B in sales in 2018 and is considered “the last unregulated financial market.” It’s also one of the last industries that has yet to be meaningfully “disrupted” by tech. I don’t want to disrupt the art market; I want to improve it. Now we have the technology to do so. I believe the solution resides at the intersection of NFTs (non-fungible tokens) and the blockchain platform Ethereum.
In the physical world, non-fungible assets are luxury assets that are considered to have scarcity value, such as real estate, cars, boats and art. In the digital realm, NFTs are unique digital representations of defined digital assets. Compared to fungible tokens, NFTs can not be divided (like a dollar can be divided into four quarters) or replaced by another token of the same type. The prevailing metaphor is birth certificates; your birth certificate is unique and can not be exchanged for a different birth certificate. NFTs were introduced in 2017 by Ethereum, a specific blockchain platform that features smart contract functionality. Blockchain is essentially a shared database that’s distributed across many computers and filled with entries, each of which must be confirmed and uniquely encrypted so that they are secure and immutable.
HOW NFTs WILL HELP THE ART WORLD
For the art world, NFTs are a game changer. In addition to their myriad use-cases for verifying ownership of physical assets such as artwork by, for example, tokenizing gallery invoices and certificates of authenticity on the blockchain, they also enable a new virtual marketplace for digital art. More and more artists are experimenting with digital processes — our current zeitgeist demands it — and yet the art world has been ridiculously slow to adopt the new interfaces through which these digital artworks can be exhibited, collected and traded. Many digital artworks are still sold on USB sticks — the artwork data can thus easily be lost, reproduced or corrupted. Because of this, market trust in the digital medium is understandably weak and the art world is late to the tech party, to everyone’s detriment.
I believe that NFTs are the next evolution of the art world — a powerful form of immediate, transparent collecting that transcends international borders and thus democratizes the collection of art.
While setting the stage for an emerging ecosystem devoted to the rising field of digital art, NFTs also solve many of the art world’s most ingrained problems. In no particular order, these are:
Ownership- The records within the blockchain prove ownership and cannot be tampered with. In his article entitled Collecting in the Age of Digital Reproduction, artist and coder Casey Reas writes, “The blockchain is the key to moving away from licenses toward property for digital media because the information is accurate and it isn’t centralized.” NFTs allow for the secure monetization and transfer of digital artworks across a globally distributed and decentralized network — a potentially limitless audience of would-be collectors that are not bound by geo-political borders and thus cannot be taxed by arbitrary governmental regulations.
Provenance & Authenticity — Artnet’s Tim Schneider summarized blockchain’s advantages by writing, “the blockchain’s decentralized nature prevents provenance data from being either falsified or lost. If a bad actor tries to manipulate the ledger on one computer, the rest of the network hosting and verifying the blockchain would detect the deviance. And since the ledger exists in the cloud (i.e. the data is distributed across multiple servers in multiple places), it can’t be lost or accidentally destroyed by a single record-holder. This makes a proper blockchain title registry more trustworthy and more durable than any centralized database tracking the same information, let alone physical archives or other analog records.” NFTs that are applied to certificates of authenticity (COAs) ensure immutability, essentially governing and storing the all-important “paper trail” for both physical and digital artworks.
Transparency — Because the blockchain distributed ledger is public, the sales price of any given NFT is public, as is the chain of ownership. Unlike the physical art world, prices do not change based on the status of the collector, they are fixed and non-negotiable.
Royalties — Smart contracts can be set up for a continuous royalty system for artists, or other partners. Unlike the current U.S. resale/auction market, every time an artist’s work is traded on the blockchain, they receive a commission. Furthermore, NFTs can be traded without the permission of the token creator and without extraneous intermediaries such as auction houses, who take commissions and might misrepresent the sales price to the owner (in order to inflate their own commissions).
Logistics — All digital art NFTs are stored on the blockchain. There is no shipping, no climate-controlled storage, no import customs or damage while-in-transit. These digital artworks can be exhibited on any screen, instantly upon purchase.
CONFESSIONS OF A MILLENNIAL ART COLLECTOR
I personally have an entire storage unit in Europe devoted to my physical artwork collection, even though I currently live in the United States. Over the years, I’ve moved from Germany, to the UK, to Russia, to Austria and now to San Francisco…and I kept collecting, even though I have no more space in my home. I collect because I want to support artists, their galleries and because, obviously, I love art. But, at a certain point, even I have to admit that this system is both illogical and unsustainable.
These days, I mostly consume art digitally by following the social media feeds of museums and galleries, or by visiting the websites and social media of artists I admire. It makes no sense — ecologically or economically — to physically visit every exhibition or art event that I would like to see. Nor does it make sense to continue to collect physical artworks that will merely sit in storage, taking up space and racking up bills. My personal story reflects a larger trend of societal shifts in how we live now. Millennials are more mobile and thus more “decentralized” than any generation before. We invented the sharing-economy. We strive for sustainability. We fund our lives through transferable and, often, immaterial means (think Venmo, start-up stock options and Instagram).
The art world is an important facet of culture, and culture is an important facet of a fulfilling and engaged life. But we need a revolution in the ways in which art and culture is created, consumed and distributed; and we need to re-imagine the art market so that it’s more sustainable, equitable and ethical for all parties involved: artists, gallerists, curators, collectors, etc. As a starting point, Blockchain.art will be partnering with well-known galleries to publish digital artwork NFTs on the Ethereum blockchain. I, for one, am profoundly optimistic about the crypto-renaissance and its art world potential. And when the art world finally joins the tech party, everyone will be invited.
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(Thanks to Emilie Trice for editing this text.)